April 23, 2014

Letter from Paris: Merkel Warms French Hearts

Angela Merkel

Angela Merkel

The integration of Europe moved forward this week following important events.

On Dec. 15 Angela Merkel was reelected for the third time as German Chancellor. Her victory was made possible with the coalition of her Christian Democrat party (CDU) and the Social Democrats (SPD).

The composition of her new government gives an indication on the future policies of Germany. Among the nine CDU ministers, Wolfgang Schauble will remain as the indispensable minister of finances and as such will guarantee a certain continuity. The crucial post of economy/energy will be occupied by an SPD member. So will foreign affairs, to be headed by pro-European Walter Steinmeier. It is interesting to note that for the first time a woman will be in charge of Defense: Ursula von der Leyen, 51, is close to Angela Merkel, French-speaking and a mother of seven. The ministry of immigration is also to be headed by a woman who, even more significantly, is of Turkish origin.

There is no deep ideological difference between the CDU and SPD parties. French analysts stress that it would be a mistake to assimilate the German social democrats to the French socialists. The former are “center left” rather than “left”.

According to tradition, Merkel’s first official visit abroad was to France. Her next stop was Brussels to attend the summit meeting of the European Council. Arduous negotiations led to important decisions – as important, some experts say, as the creation of the Euro currency.

Merkel will not abandon her general policy of financial discipline, but will relax her hard austerity line. Germany’s economic policy will be slightly less liberal. A minimum wage of 8.5 euros is to take effect within three years. The new program will reduce the number of “poor workers” and should give a boost to the domestic consumption. It will also alleviate criticism expressed by other European countries of unfair competition on the labor market.

A banking union and the European defense were the main topics of discussion. The creation of a banking union is intended to put a stop to the bailout of failing banks at the expense of the tax payers. So far financial support for countries in trouble like Greece or Spain has been supported by only 27 percent of Germans, and even less – 20 percent – of the French.

Merkel has always been against the “mutualisation” of the sovereign debts. The new directives give greater power to the Banque Centrale Européenne (BCE – Central Bank of Europe) over the banks in order to prevent speculative investments. The BCE will also oversee the creation of a “funds of resolution,” financed by the banks, which will amount to 55 billion by 2026. Brussels will only intervene in case of urgent crisis. Obviously it will be hard for many of the states to lose sovereignty over their own budget.

The other subject of discussion in Brussels was the European defense. For Germany, defense is almost a taboo and most European states – except France – are unwilling to interfere in foreign military conflicts. Some progress though was made in specific areas such as cyber security, refueling of planes in the air, the use of drones by 2025 and controlling piracy along the Somalian coast. A limited amount of logistical and financial support is likely to be welcomed, particularly by France, who acted alone in both Mali and the Republic of Central Africa.

The Franco-German ” couple” appears now to be returning to center stage. As seen from France, the new developments are generally well-accepted by economists and other specialists. Overall, they seem to be impressed by the pragmatic behavior of the Germans and believe the German vote was a smart one – indeed, a rare mark of approval to be found in French opinion of German politics.